Study: file-sharing leads to “chart churn,” helps indie acts

A new study tracks changes in the patterns of music popularity in the age of …

Tracking if and how P2P file-sharing has altered the music business is a difficult challenge. The advent of the MP3 era has enabled illicit online file-swapping, but it also enabled the portable music players that have changed how music is listened to. Ambiguous study results and hyperbole from opposing camps on the issue haven't helped make much sense of these changes, either. A study that appears in the latest issue of Management Science attempts to bring some clarity to the issue. It uses some clever methodology not only to gauge the impact of file sharing, but it also attempts to provide a detailed glimpse into the changing music business.

The study drew much of its data from the Billboard Top 100 list of albums. Although record companies typically release over 30,000 albums per year, most sell under 1,000 copies; a disproportionate amount of music profits come from those rare albums that become popular. Researchers tracked the survival of albums that appeared on the Top 100 in terms of the total weeks they spent on the list, obtaining data from seven different time periods.

Those time periods were sliced two ways. The first was before and after what the authors viewed as a critical period in the music business. They suggest that 1998 to mid-2000 saw several major events that had the potential to change the dynamics of album sales. These included the introduction of the MP3 format and the rise of Napster, as well as the passage of the DMCA. The first year after that period (2001) was also the first year that saw a drop in total album shipments. General measures of the music economy, such as superstar status and marketing by one of the "big four" labels, were included for all time periods.

The post-MP3 period also includes data on file-sharing gleaned from WinMX, which the authors claim was one of the top three file-sharing services during this time. File-sharing data was also obtained for one additional point: after June 2003, when the RIAA announced it was going to shift its focus from suing the service providers to going after individual file-sharers. Data suggests that sharing dropped by as much as 80 percent after that announcement, so this period acts to partially isolate the role of piracy from the other changes that occurred during this time period.

The data on the general music economy support the view that the primary factor influencing music sales is the burden that listeners face in terms of simply finding music to buy. Factors that raise an album's public prominence therefore increase its chart survival. These factors include access to the publicity machines of major labels, a high-placed debut on the charts, and past chart success from the artist.

Consistent with the idea that P2P sharing lowers the "cost" of finding new music, the data suggests that music buyers now have shortened attention spans, so the amount of churn on the charts has gone up dramatically since 2001. Most albums spend a reduced amount of time on the charts, and those that debut at a low ranking tend to drop off much faster than they before. The effect isn't uniform, however; albums that debut high on the charts still have longer survival times, and female solo artists seem oddly immune to the changes.

The authors say that their data link this trend directly to sharing. They conclude, "We find that, although sharing does not hurt the survival of top-ranked albums, it does have a negative impact on low-ranked albums. These results point to increased risk from rapid information sharing for all but the 'cream of the crop'."

But the rapid turnover on the Top 100 has had an unexpected side effect: more albums from the independent labels appear on the charts, and those that appear survive longer than they had before. Releases from indie labels are still at a disadvantage compared to those from the majors, but the gap between them appears to have narrowed. Those who predicted that file-sharing would help popularize more obscure titles appear to have been on to something. The report suggests that this may provide an additional, cynical motive for the majors to combat file sharing: song swapping reduces the majors' influence in the music market in a way that has nothing to do with lost sales.